By Tiernan Ray

Boutique research outfit BlueFin Research PartnersJohn Donovan and Steve Mullane this morning write that Apple's “builds” of the iPhone and the iPad, meaning production rates for the devices, appear “strong,” supporting their sales numbers for the year, and that they are seeing “for the first time” some supply chain activity that implies production of a rumored wearable device this year from Apple.

The authors do not disclose with what sources they have gathered the information, referring merely to “checks.”

The authors reiterate forecasts for 178 million units of the iPhone to be sold this calendar year, and 76 million units of the iPad, and are encouraged by what they think they've defected about production of both iPhone and iPad:

We are emboldened in our early year reads of iPhone shipments surpassing consensus and our latest checks suggest the updated builds now sit squarely in the crosshairs of our initial CY 2014 forecast of 178M units. With the release of the iPhone 6 less than 3 months away, the record build numbers are not surprising. However, we are intrigued by the continued – and growing – iPhone 5s picture throughout the balance of 2014. Again, some of this is to be expected as retail stores will need ample stock as contracts expire and iPhone 6 availability could be challenging after the launch. We are also seeing increased evidence that both versions of the iPhone 6, 4.7″ and 5.5″, are due for a fall 2014 release [...] Our recent check are encouraging in that AAPL is prepping for a swell of demand for its soon to be released iPads and we are tracking builds that would actually attain, if not exceed, our initial 29M annual forecast. However, we remain cautious because shipments would have to be exceptionally strong in the last four months in order to reach these levels. On the traditional PC front, iMac demand continues to trend higher, albeit minimally, and we are encouraged by the newer products due later in 2014.

That 178 million iPhone estimat would include 75 million units of what they assume will be an iPhone 6, in August or September.

Part of their iphone optimism is about the number of subscribers due for an upgrade, writing “well over 50% of each carrier's iPhone installed base is still using iPhone 4/4s or even iPhone 3 devices.”

“Whether or not people have eschewed migration to newer phones due to contract obligations or for lack of motivation as the iPhone 5/5c/5s was not compelling enough, there remains a fertile opportunity for the larger screen iPhone 6 products as supported by the massive build numbers we are seeing.”

The authors see production of Apple's next custom chip, the “A8,” ramping:

We continue to see no adjustments to the production level estimates/forecasts to date (see Figure 3). Samsung's 28nm production remains on pace to sequentially decline 4-4.5% in Q2. Meanwhile, the 20nm AAPL production estimates at Taiwan Semiconductor Manufacturing (TSM) remains on target to reach 30-35K wpm by the end of this month.

As for the iWatch:

For the first time, we are seeing evidence of chaotic activity prepping for the release of the iWatch product in CQ4 2014. As this is a new product, getting accurate reads on yields versus production is tricky and we are looking at an initial quarter shipment total of 2-3M per month, keeping in mind that projected builds in the outlying quarters are substantially higher than this total. We are unclear if the iWatch is linked in some fashion to the iPhone device and thus if it is a companion type of product, we would think pricing would be similar to current iWatch-like devices in the $200 range.

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.